Who is Reed Hastings, founder of Netflix?

Reed Hastings revolutionized the world of entertainment with the launch of Netflix in 1997. The streaming giant was at first just a company selling DVDs on the Internet. It was in 2007 that the company diversified and opened up to new services. Zoom on the journey of Reed Hastings, the genius behind this platform that has transformed our uses.

Reed Hastings now owns 1% of Netflix which went public in 2002. Before his Netflix adventure, he sold his first software company which he launched in 1991, Pure Software, which was very successful. But the engineer within him wasn’t necessarily right for the CEO job he held. He remembers: “I tried to fire myself twice, but without success. » The company was eventually sold for $700 million in 1997.

In 1997, he created Netflix which originally functioned as a DVD subscription service and over time became a video streaming service offering many movies, shows and series as well as original content. It now has 221 million customers worldwide.

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Biography of Reed Hastings: Teaching, entrepreneurship…

Reed Hastings was born on October 8, 1960 in Boston. He is the founder of Netflix and is a board member of Facebook. He was born into a very wealthy family, the son of a lawyer father who worked in the administration of Richard Nixon for the Ministry of Health, Education and Welfare. “He comes from the highest American society, we could almost speak of nobility”underlines Gina Keating, a former journalist for the Reuters agency, who followed him for many years before releasing a book on his entrepreneurial adventure, “The Epic Battle for America’s Eyeballs” (Portfolio Hardcover, 2012).

Reed Hastings decides to join Bowdoin University in Maine where he earns a degree in mathematics. He then joined the Marine Corps before teaching mathematics for three years as a Peace Corps volunteer in Eswatini. He then resumed his studies at Stanford University in artificial intelligence. In October 1991, he founded Pure Software, a company whose goal was to facilitate the use of the operating system and which was therefore sold in 1997 for 700 million dollars.

The young entrepreneur finds himself with a nice sum in his pocket, he then decides to embark on a new project with the help of his partner, Marc Randolph. The idea for Netflix came to him after paying $40 for a movie he rented and returned too late.

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Reed Hastings: the crazy adventure Netflix and the separation with Marc Randolph

While Netflix was originally a subscription and mail-order DVD rental service, Marc Randolph and Reed Hastings made a change to create an entertainment platform on which Internet users could freely access a library of content purchased from low prices to studios that did not recognize the value of what they had in their hands.

In the 2000s, Reed Hastings took control of Netflix and dismissed his partner, Marc Randolph, marking his ground. “At the very beginning, the company was dominated by marketing and creatives. They were the ones who invented the interface, who really thought about how people would use the site. Reed had no appetite for that side of things. In the eyes of the engineers, however, he was a rockstar,” explains Gina Keating.

Reed Hastings had big ambitions for Netflix and wanted to make his company a multinational. It’s a successful bet given that the platform now has millions of users around the world. The CEO of Netflix is ​​passionate about algorithms. In 2005, he spends his Christmas holidays, not to enjoy his family, but to design a mathematical formula superior to that invented by his engineers. Netflix is ​​now known for the power of its algorithms which suggest content to users that they are likely to enjoy.

In the mid-2010s, Netflix opted for the creation of original works: films, series, cartoons, interactive content and now video games… Now, Reed Hastings has made Netflix one of the biggest production studios of all. Hollywood. The platform no longer depends on the content of other large firms which have also entered the race for streaming.

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Reed Hastings management lessons and lessons

According to the book No Rules Rules: Netflix and the Culture of Reinvention, it is important for the company to give some freedom to its employees. Their performance depends above all on trust. At Netflix, employees don’t have sick days or enforced vacations. Everyone is free to manage their time as they wish.“We don’t try to make our employees happy, we try to make them productive.” Reed Hastings, meanwhile, does not give up his days off and takes six weeks a year to take a step back and focus on his “physical and mental” well-being. He says that these long breaks make him much more efficient.

In addition, Netflix adopts a policy of transparency. If, in some boxes, the financial data is secret, this is not the case within streaming platforms. This creates a greater sense of responsibility and belonging.

One of the management methods adopted by Netflix and Reed Hastings is the keeper test (guardian test): Reed Hastings only wants to keep in his company the collaborators for whom their managers would do anything to keep them on their team.

Another method used by Reed Hastings is the 360 degree feedback dinners. These are annual dinners where the members of each team meet for long hours. In turn, each member of the team takes the floor and gives their opinion on a particular person, listing their strengths and weaknesses. “Initially, I was shocked. But after interviewing 200 people, I found that people liked this exercise. The first time, you go to this dinner a little tense. But in reality, everyone tries to be generous and to help the person who is criticized. This dinner takes courage, but it also allows everyone to get to know each other better,” remembers Erin Meyer.

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The key principles of Reed Hastings

The organization of Reed Hastings is based on three important principles:

  • Attract the best talent and retain it regardless of the cost.
  • Promote organizational transparency.
  • Delete controls (vacation days, hierarchical controls).

In 2001, Netflix had to cut 120 jobs. While Reed Hastings was convinced that these departures would have an impact on the atmosphere at work, the opposite happened. By choosing to weed out those who were producing passable work, the CEO saw an increase in “talent density.” Which means that everyone’s quality of work, whether good or bad, is contagious. Those with average work inevitably affect everyone else and the quality of group discussions becomes irrelevant.

Reed Hastings applied this same principle to Netflix co-founder Marc Randolph. He convinced the latter to return 650,000 shares he owned at the time and relinquish his hierarchical functions.

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The very particular character of Reed Hastings

Reed Hastings adopts an attractive compensation strategy and recruits dedicated and passionate people. But the atmosphere at work is not necessarily warm. The CEO explains: “We are not a family”. The successful entrepreneur is extremely demanding and cannot stand “shiny assholes”. It is for this reason that dismissals are very frequent and compensation is significant. For example, in September 2001, Reed Hastings terminated the contract of 40% of its workforce.

Moreover, the boss of Netflix has not always made the right decisions, as demonstrated by the example of his terrible decision, in 2011, to increase the combined DVD-streaming subscription price by 60%. It was only a matter of time before Netflix lost 800,000 subscribers and saw its stock price plummet 74%.

Reed Hastings has a very strong and slightly egocentric personality: “The fact of having been so often right sometimes pushes him to arrogance. Before his communicators corrected him, he sometimes had a tendency, with journalists, to roll his eyes and say: “What a stupid question! “”, notes Keating in his book. He recognizes all the same that other engineers are able to develop an algorithm more powerful than that of Netflix, as demonstrated by the competition he organized in 2006, offering 1 million dollars to those who would improve by 10% the predictive power of one of its programs.

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The stock market crash of Netflix

The streaming giant’s stock has lost 40% of its value in recent months. This fall comes after the announcement of the results for the first quarter of 2022 and the loss of 200,000 subscribers. The industry leader who hoped to gain 2.5 million subscribers lost for the first time in ten years. Reed Hastings and the group explain in particular that this drop is due to the suspension of his service in Russia, following the war in Ukraine.

In addition, platforms have flourished in streaming and inflation has had a negative impact on the performance of the company, which decides to make a big decision: to appeal to advertising funding. ” Netflix indicates that it expects another 2 million fewer subscribers in the 2nd quarter and is beginning to find solutions to charge the 10 million users who benefit from it for free by sharing access codes”underlined Kenneth Leon, analyst for CFRA which lowered its estimate of price of the action.

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Who is Reed Hastings, founder of Netflix?

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